NC - Policy Provisions, Options, and Other Features

To meet the requirements of the entire contract policy provision, an insurance policy must contain what?

A copy of the original application

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?

Absolute assignment

Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?

Cash surrender

What are the three nonforfeiture options in life insurance policies?

Cash surrender, reduced paid-up, and extended term

What are the dividend options in life insurance policies?

Cash, reduced premium, accumulation at interest, paid-up additions, paid-up options, and acceleration of endowment

What type of assignment is used to secure the payment of a debt with an existing life insurance policy?

Collateral assignment

What beneficiary is next in line after the primary?

Contingent Beneficiary

An applicant misstated her age on her policy. What will happen to the DB?

DB will be adjusted for the proper age.

What is the purpose of settlement options in life insurance policies?

Determine how the death benefit is paid out to the beneficiary

What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?

Entire contract

What happens to the proceeds of a life insurance policy with no beneficiary?

Estate

What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

Extended term

What provision in a life insurance policy extends coverage beyond the premium due date?

Grace period

What required provision protects against unintentional policy lapse?

Grace period

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Incontestability

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit?

It will be paid to the insured's estate.

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?

Lump-sum payment

What settlement options are available in life insurance policies?

Lump-sum/cash, fixed period, fixed amount, life income, interest-only

Is the beneficiary required to have insurable interest to the insured?

No.

What is the name for a life insurance policy rider that provides coverage to insured family members?

Other-insured rider

What dividend option can increase the death benefit of the existing life policy?

Paid-up additions

What dividend option is automatically selected by the company if not chosen by the policyowner?

Paid-up additions

An insurer is 10 years older than he stated on his application. What happens to the DB?

Pay a reduced DB

Who controls changes in premium payments, face values, and loans in a life insurance policy?

Policy owner

Who has the right to the cash value of a life insurance policy?

Policy owner

With the interest only settlement option, what happens to the policy's death benefit?

Policy proceeds is retained to the insurance company; only the interest is paid to the beneficiary

What beneficiary designation has first claim to the death proceeds of a life insurance policy?

Primary beneficiary

What nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up

What provision allows the policy owner to reactivate a lapsed life insurance within a specified amount of time, with proof of insurability?

Reinstatement

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one?

Reinstating policy is based on original age

What are policy dividends?

Return of unused premiums

What type of beneficiary can be changed at any point by the policyowner?

Revocable

What term is used to describe methods of payment of the death benefit to the beneficiary upon the death of the insured?

Settlement options

What happens to a policy's cash value under an extended term nonforfeiture option?

The cash value is converted to the same face amount as in the whole life policy.

With the reduction of premium dividend option, how is the dividend used?

The dividend is applied to next years premium (reduces next years premium)

What does the term double indemnity mean?

The insurer will pay a benefit of twice the face amount

A policy owner takes out a loan from his whole life policy. He dies before the loan is paid back. What happens to the death benefit?

The loan is subtracted from the DB

In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of installments?

The longer the period selected, the smaller the installments will be.

What is the purpose of a free-look period?

To allow the insured to return the policy with a full refund

What is the purpose of the Automatic Premium Loan provision?

To prevent lapse of policy due to non-payment of premium

What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

Waiver of premium

What are the most common exclusions in life insurance policies?

War and military service, hazardous occupation, and aviation

When will a contingent beneficiary receive death benefit from a life insurance policy?

When the primary beneficiary dies before the insured.

When can an insurance company use suicide as a defense against paying a death claim?

When the suicide is committed within a specified period of time after the policy is purchased (usually 2 years)

Who does the common disaster clause protect?

contingent beneficiary